Based on interviews with state health insurance regulators and ombudsman staff and an analysis of documents, some interesting lessons emerge from the experience of the six states in operating health insurance complaints systems.

Table 10.1 indicates that in three states (Oregon, Texas and Vermont) a single government agency has the major regulatory responsibility for health insurance complaints management. However in the other three states (California, Maryland and New York), responsibility for indemnity health insurance, HMOs and quality complaints is split across two government agencies.

In attempting to determine what might be the optimal regulatory split, it is instructional to examine the evolution of regulatory authority for health insurance and hence, complaints management. Historically, health insurance regulation has focused on financial solvency, co- existing with regulation of other insurance business lines in state insurance departments.

The long history of financial solvency regulation is illustrated by Texas, which created a Department of Insurance in 1876, the same year as the State Constitution was adopted. The Department's establishment was spurred by the growth of wildcat insurance schemes and bankruptcies during a period of economic and population growth. In the 1950s the Texas legislature, confronted by the collapse of 23 insurance companies, passed at least 16 insurance- related bills.

In an environment of indemnity health insurance, regulation tended to focus on rates or premiums, contracts and other solvency measures (e.g. minimum reserves). Quality regulation through professional and facility licensing was historically the responsibility of state health agencies, with little need for co-ordination between state insurance and health agencies.

The emergence of managed care organizations which combined financing and delivery of health care exposed a need for new regulatory skills and powers. While state insurance departments tended to have a broad spectrum of enforcement powers, they lacked health- specific skills in quality assurance and improvement. In California, as early as 1975, this prompted the complete separation of responsibility for indemnity health insurance and managed care under the Departments of Insurance and Corporations respectively.

California is continuing this focus on ever-more targeted regulation with the recent establishment of the Department of Managed Care.

Department of Managed Care is due to take over responsibility for managed care including quality complaints by no later than July 2000

Since January 1999 the Health Education and Advocacy Unit has had an expanded role in helping consumers under the new Appeals & Grievances law

None

None

Until 1996 Department of Health was responsible for HMO quality

Until 1996 the independent Health Care Authority was responsible for quality oversight of HMOs, with all other insurance regulation the responsibility of the Department of Banking, Insurance and Securities

Not applicable

While it would be tempting to view the Californian experience as a possible evolutionary path along which other states will move, the evidence is mixed. California's population size and unusually high penetration rate for managed care have allowed the emergence of a new regulatory agency, midway between traditional state insurance and health agencies. Of the two other more populous states in this study, Texas has gone furthest down the Californian model, separating responsibility for indemnity insurance and managed care in different divisions of the state insurance agency.

However it is questionable whether splitting regulatory responsibility and complaints management by plan type is sensible given the fluidity of the health insurance market and the potential for the market to evolve in response to different regulatory incentives. Consumers are also unlikely to find the structure and regulation of the health insurance market intuitive. In California, for example, consumers with a complaint may not even know whether they are enrolled in a PPO or a POS plan, much less that the former is regulated by the Department of Insurance and the latter by the Department of Corporations (shortly to fall under the Department of Managed Care).

Interestingly, in none of the states in this study have health agencies taken the major role in health insurance regulation. In Maryland and New York health agencies have a limited role mainly regarding quality issues around health insurance. Moreover, in two states, Texas and Vermont, there has been a diminution of the role of health agencies. In 1996 the Texas Department of Health ceded responsibility for HMO quality complaints to the Texas Department of Insurance, while the Vermont Health Care Authority was merged into a larger government agency that had responsibility for insurance regulation.

The dominant role for state health agencies has generally been in complaints management for the Medicaid program and in professional licensing and oversight of physicians and hospitals. However the growth of managed care has blurred the historical distinction between insurance regulation and provider regulation, creating a need for improved communication across state health and insurance regulatory agencies. This has been brought into sharp relief in California with the financial collapse of several physician groups which assumed financial risk from HMOs. While California has experienced probably the highest level of integration of medical groups, state insurance regulators in New York, Oregon and Texas in this study also expressed concern about the delegation by insurance plans to medical groups and other intermediaries of certain functions, and some confusion about the consequential regulatory authority. Once again, consumers are unlikely to appreciate the implications of new contractual relationships between their insurance plan and providers. Many consumers will be uncertain about who has regulatory jurisdiction and to whom they can turn if they have a complaint.

Policy implications and recommendations

There is no coherent system or universal model of health insurance complaints management across the states. While this study has focused on state complaints management largely relating to commercial health insurance, many other federal, state and private agencies are also involved in oversight of health insurance plans or complaints management. These include the U.S. Department of Labor, the federal Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)) (HCFA(now known as CMS)), state Medicaid agencies, the federally funded SHIP program providing counseling and assistance to seniors on health insurance and many private assistance programs targeted at condition-specific populations.

The multiplicity of agencies involved in oversight of health insurance plans makes it difficult to develop a comprehensive picture of how well insurance plans are performing on consumer complaints. Several states have developed strategies to meet this challenge of overlapping responsibilities.

Given the multiplicity of existing regulatory models, each with their own history and inertia, the pursuit of uniform models of health insurance complaints management is not recommended at this time. However, it is recommended that strategies be developed which clarify responsibility, facilitate communication and enhance the knowledge and experience of regulators in complaints management.

It is recommended that the following examples of best practice may be of value in improving regulatory oversight of complaints management:

A Memorandum of Understanding could help clarify responsibility where there is shared authority for health insurance complaints across several government agencies, including federal and state agencies. One state-based example is the Memorandum of Understanding instituted in Maryland to clarify responsibilities between the state Department of Health and Mental Hygiene and the Maryland Insurance Administration (Maryland, Attachment 1). This strategy is supported by the NAIC.

Periodic meetings of state and federal regulators involved in health insurance oversight should occur to identify emerging issues across the sector and plan-specific issues. For example, California established an Interagency Connection in 1999 involving the state Departments of Insurance and Corporations, the U.S. Department of Labor and HCFA(now known as CMS), with the taskforce meeting quarterly.

Regulators at both federal and state level, including those in health agencies and insurance agencies, could consider developing a single entry point for consumer complaints related to health insurance. For example, the Maryland Insurance Administration is now designated as the central entry point for health insurance consumer complaints with referrals to other agencies as relevant. This may help overcome problems of consumer confusion about regulatory jurisdiction associated with the rapidly changing health insurance market, including the blurring of plan and provider roles. Under this proposal there would still need to be specialized depth in complaints management within agencies, supported by clear referral protocols

Table 10.2 identifies the different models of consumer assistance or ombudsman programs and their major features in the five states with such programs (New York being the exception). The NAIC Consumer Complaint White Paper is essentially silent on the role of ombudsman programs and is hence not included in this table.

There is immense variation in terms of the independence of ombudsman programs across states, a critical factor in determining the ability of such programs to undertake consumer advocacy. The Office of the Health Care Ombudsman in Vermont is the most independent public sector model across the studied states, having its own statutory basis including legislative protection for undertaking consumer advocacy and dedicated funding through a contract, with the authorizing legislation specifying that the contract be awarded to a non-profit organization.

The “location” of the Vermont Ombudsman “outside” state government gives it greater independence than either the Maryland Health Education & Advocacy Unit or the Texas Office of Public Insurance Counsel. The assistance programs in these two states are still theoretically more subject to political influence as they are staffed by state government employees. However, in turn, both these agencies have greater independence than ombudsman programs which are internal to the state insurance regulator, as occurs in California, Oregon and also in Texas for the legislatively created (but not yet operational) ombudsman program. (Note that the Texas Office of Public Insurance Counsel is an ombudsman function for systemic consumer representation, while the yet to be established ombudsman program created under Texas legislation in 1999 is designed to assist individual HMO consumers in complaints and appeals).

Of the two states with “internal” ombudsman programs, the Consumer Advocate in the Oregon Department of Consumer and Business Services has a systemic role in examining complaint trends, monitoring the implementation of the Oregon Patient Protection Act 1997 and developing legislative concepts. In contrast, the internal Ombudsman programs in both the Department of Corporations and the Department of Insurance in California are more accurately described as internal quality improvement initiatives, rather than true consumer-focused ombudsman programs.

Another feature of the independence of ombudsman programs is the extent to which they are publicly accountable through the release of reports to either the legislature or the general public. None of the existing internal ombudsman programs in the California Departments of Insurance and Corporations and the Oregon Department of Consumer and Business Services produce publicly available reports. In contrast, all the “independent” ombudsman programs release reports to the legislature and/or the general public.

Table 10.2: Consumer Assistance and Ombudsman Programs

Features

California

Maryland

Oregon

Texas

Vermont

Ombudsman “independent “ of Insurance Department

Health Rights Hotline (HRH) in Sacramento area only

Health Education & Advocacy Unit, Office of the Attorney General

Office of Public Insurance Counsel

Office of the Health Care Ombudsman

Ombudsman “internal” to Insurance Department

Office of Ombudsman in Department of Insurance and Ombudsprogram in Department of Corporations; and planned Office of Patient Advocate in new Department of Managed Care

Consumer Advocate in Consumer Protection Section, Department of Consumer and Business Services

Ombudsman program created in 1999, but no funding, work currently subsumed into HMO Division of Department of Insurance, so essentially not operational

Limited education directed to consumers, with exception of HMO report cards; Major focus is systemic advocacy and reports

Yes, brochure, poster, TV, meetings

In considering the relative merits of ombudsman programs, it should be noted that even in states with “independent” ombudsman programs, state insurance regulators still believed that it was vitally important for their agencies to also provide a consumer complaints function. For example, the Vermont Division of Health Care Administration noted that their complaints function provided “a pulse on the market”. The information gleaned from consumer complaints is considered integral to many other functions undertaken by insurance regulatory agencies including monitoring financial solvency and analyzing the impact of changes to the regulatory framework.

However ombudsman programs can play a vital, complementary role to the complaints functions of state regulatory agencies. One key distinction between the two is the necessary focus on adjudication and enforcement by state regulatory agencies, compared with a stronger focus on mediation and consumer advocacy by ombudsman programs. Traditionally, state insurance regulatory agencies have defined one of their key missions as the administration and enforcement of the state insurance code. Hence, staff of the Maryland Insurance Administration described their role as determining whether insurance plans are in compliance with statues and their contractual obligations, with one advantage of this role being the ability to take enforcement actions including issuing penalties.

In contrast, ombudsman programs can serve consumers through providing assistance for complaints and problems that do not necessarily involve breaches of the insurance code. For example, the Health Education & Advocacy Unit in Maryland described one of their strengths as being able to work creatively with insurance plans to seek satisfactory resolution of consumer problems through mediation, even in the absence of specific legislative breaches. Similarly, staff at the privately funded Center for Health Care Rights in Sacramento, California, expressed confidence at their ability to provide effective assistance to consumers, despite lacking direct regulatory authority over plans.

Another important contribution of ombudsman programs is to combine individual consumer assistance with advocacy for systemic reform. Of the states studied, the Vermont Health Care Ombudsman and the Sacramento Center for Health Care Rights are strong examples of the value of using casework to drive policy advocacy, which can most readily occur in independent ombudsman programs. For example, the Vermont Health Care Ombudsman participates in the Vermont Health Access Oversight legislative committee, where she can present views independently of the Vermont Health Care Administration on problems facing Vermont consumers. The Center for Health Care Rights is particularly active in using information derived from its consumer hotline to undertake what it calls “evidence-based advocacy”. Hence the Center publishes policy reports with concrete recommendations directed at health plans, providers, policymakers and regulators on reforms necessary to improve the health system. Staff at the Center for Health Care Rights challenged the view that the primary function of ombudsman programs should be to assist individual consumers, arguing that this was a bottomless task, with the goal instead being to use examples of individual consumer problems to drive systemic reforms for all consumers.

Recommendations

It is recommended that ombudsman programs should be considered as a vital, complementary function to regulatory consumer complaint functions. Ombudsman programs can make important contributions in resolution of individual consumer problems through mediation and in undertaking systemic advocacy.

It is recommended that the following examples of best practice may be of value in developing or enhancing consumer assistance and ombudsman programs:

Independence of ombudsman programs can be enhanced through legislative authority and dedicated funding. For example, the Vermont Health Care Ombudsman has legislative protection “to speak on behalf of consumers…without being subject to any retaliatory action”. The Vermont Health Care Ombudsman also has funding guaranteed under a contract, in contrast to the absence of funding in the authorizing legislation for the ombudsman program in Texas.

Accountability and independence of ombudsman programs are also fostered by requirements for such programs to produce regular reports to the public and legislature. The privately- funded Center for Health Care Rights in Sacramento makes “the voices of health care consumers count” through regular published reports on consumer problems and suggested remedies (see California, Attachment 5).

An NAIC survey of state insurance regulators undertaken in 1999 found that only 26 states affirmatively published complaint information “in either an annual report, consumer brochure or on the Department’s web site”. Readers are reminded that the four states with published reports (California, Oregon, New York and Texas) discussed below represent a sample of the higher- performing states with respect to complaints report cards. They were selected for inclusion in this study based on a web site review of the quality of published complaints reports across all states, with these four states appearing to produce among the most comprehensive reports.

Table 10.3 identifies the major features of the report cards published in the four states. Neither Maryland nor Vermont agencies published comparative health insurance complaints data, similar to the other four states. In Maryland both the Maryland Insurance Administration and the Health Education & Advocacy Unit have published reports analyzing the impact of the new appeals and grievances legislation, but do not routinely publish data on all health insurance complaints. It should also be noted that an alternative source of complaints information to published report cards is health insurance plan-specific complaints information. In all of the six states studied, regulators or ombudsman staff made available plan-specific information either through published reports (e.g. Oregon, Attachment 2), through their websites (e.g. Texas) or verbally in response to telephone calls from the public (e.g. Maryland). Staff at the Maryland Health Education & Advocacy Unit noted that consumer requests for plan-specific complaints information were more common during open enrollment periods. However the major focus of the following discussion is the status of comparative complaints reports.

In considering the value of complaints report cards for consumers, the starting assumption is that consumers will be able to exercise some choice among health insurance plans. To the extent that consumers have no or limited choices, report cards – whether they compare measures of quality, health prevention, consumer satisfaction or consumer complaints – are unlikely to be actively sought by consumers. The consumer market for report cards is therefore limited to a subset of the population, with the attention span probably limited to enrollment periods, rather than to more continuous interest in monitoring plans’ performance.

One key feature of complaint reports cards is the measure that they use to compare the relative performance across health insurance plans. Focus groups undertaken by the Pacific Business Group on Health (Schauffler and Rodriguez, 1996) support consumers’ unease with quantitative data. Consumers reported preferring formats based on grades (A, B, C, etc) over rankings such as “average” or “below average”, which, in turn, were favored over proportions such as 80% or 85%. In another focus group study, Jewett and Hibbard (1996) found that 43% of low comprehension problems of health quality report cards were due to gaps in understanding aggregate or quantitative concepts (e.g. mammogram rates were often confused with ratings or fees).

When assessed against these findings, the standard of the five complaints report cards examined in this study leaves considerable room for improvement. The two complaints report cards produced by the California Department of Corporations and the Texas Office of Public Insurance Counsel are based solely on complaints rates related to the number of plan enrollees. Both reports provide data on the average complaint rate across plans, allowing consumers who understand the concept of rates to assess the performance of individual plans against the average. Of the two, the Texas OPIC report is more user-friendly in presenting the complaints rate data in graphical format, as well as tabular format, which is helpful to consumers who are less at ease with quantitative data.

The Oregon and New York reports improve upon the Texas and California Department of Corporations reports by including “rankings” of complaints (e.g. 1, 2, 3, 4 etc,) in addition to using complaints rates. This grading system is more likely to be understood by consumers, although the use of the open-ended ranking is problematic. Hence, for example, of the 72 Oregon health insurance plans ranked 1 to 72, the first 11 plans recorded zero complaints, but are still ranked from 1 to 11 on the basis of their premium volume. It may have been more helpful for regulators to use their expertise to group plans into a limited number of grades (A to E), given that consumers are likely to have difficulty understanding whether there are substantive differences in complaints performance using an open-ended ranking.

Finally, of the five reports, it is only the privately funded Center for Health Care Rights in California that moves beyond complaint rates or rankings to also include a relatively simple “average” ranking. The Center’s report includes the following 5-point graphical scale

- much higher than average;

- higher than average;

- lower than average;

- much lower than average; and

O - not statistically significant to allow users to visually compare the complaints performance of plans and more readily identify plans with significantly higher or lower complaints rates.

The Center for Health Care Rights report also uses a range of other presentation formats to explain complaints data including bar charts and consumer anecdotes. Hence, rather than simply listing the complaints rates for different types of problems (e.g. inappropriate care, customer service problems), the Center includes an example of each problem through including the story of a consumer with this problem, the action taken by the Hotline to resolve the problem and the system problem identified as a result of individual consumer problems.

Another criterion for consideration in assessing complaints report cards is the extent to which they offer guidance to users.

Hibbard, Slovic and Jewett (1997) suggest that some factors which may be useful in report card design generally include:

Provision of global ratings by experts – to help reduce the information-processing burden; and

Use of a decision support method that leads consumers step by step through a rational process, including framing the issues through providing contextual information.

Gormley and Weimer (1999) also support including “expert” opinion such as the use of benchmarks or objective standards against which readers can assess performance. In considering complaints reports cards specifically, Gormley and Weimer (1999) argue strongly that the data presented should only include “justified” complaints, implying that a regulator or expert has made an adjudication as to whether the complaints were found proven.

Once again, the results of the five complaints reports against the factors that comprise this criterion can best be described as patchy. Only the New York report provides advice on complaints and complaints rates using “upheld” or justified complaints. The Center for Health Care Rights includes all complaints received in its reports and argues convincingly that as an independent consumer assistance program, its role is not to adjudicate consumer problems but to provide assistance to all consumers including understanding their rights. However if this argument is accepted, the other two regulatory agencies (the California Department of Corporations and the Oregon Department of Consumer & Business Services) are deficient in not including justified complaints data in their reports. Regulators at the California Department of Insurance noted that there had been significant resistance, including legal challenges from the insurance industry generally (not limited to health insurance) to the publication of complaints data. As a consequence of this industry “push-back”, the California Department of Insurance now establishes proof of justified complaints and notifies insurance plans by letter when a complaint is found to be justified. Perhaps in response to this situation, the California Department of Insurance does not publish any comparative health insurance complaints rates.

The five complaints reports also demonstrate fairly limited performance when assessed against other aspects of the guidance criterion (e.g. use of expert global ratings, decision-support methods, provision of contextual information). If it is assumed that complaints data should be presented in the context of other health insurance plan performance measures to allow consumers to develop a multi-dimensional view, the New York and Texas reports are superior to those of the other states. These reports include a range of other relevant data such as HEDIS measures, NCQA accreditation status and CAPHS measures, in addition to complaints data. Some of the reports include other background information that consumers may wish to consider in making plan selection decisions such as:

Advice on choosing a financially healthy insurance company and how to manage the cost of insurance (Oregon); and

Consumer legal rights and protections, and information about different types of health plans and how they operate (Texas and New York).

Staff at the Center for Health Care rights indicated that their report was not intended primarily as a guide to consumers shopping for insurance, but is focused on providing consumer information which is more explanatory of rights and is also directed at regulators and employers for purposes including policy advocacy.

All the complaints reports struggle with providing expert global ratings or decision support methods to help users understand and interpret complaints data. In part, this probably reflects both the embryonic status of complaints reports and the lack of consensus on objective standards. In contrast, health quality report cards have a slightly longer history and some expert consensus around measures such as HEDIS and CAPHS (for example, immunization rates can be compared against performance benchmarks set in Healthy 2000 or state health documents). At interview, state regulators invariably mentioned the difficulty in interpreting “high” and “low” complaint rates, advising that one factor affecting comparative complaints rates across plans was the extent to which plans actively publicized the ability to make complaints, including providing contact information for the state insurance regulator. However, only the California Department of Corporations report provides any advice on this issue, stating that the variations in complaints across plans can be influenced by factors including “the effectiveness of the health plan’s internal grievance procedures, and the quality of the health plan’s services”, together with the “degree to which the health plan discloses to enrollees the right to file” complaints with the regulator. (Note that the New York report provides similar advice on grievances and utilization review appeals, but not in the section of the report containing information on complaints made to the regulator). Admittedly, the inclusion of such advice is likely to provoke a frustrated response by readers of “So what does this mean, should I discount all complaints data?” Unfortunately, this reflects the general lack of agreement on the validity and interpretation of complaints data.

Policy Implications and Recommendations

The above discussion suggests that existing complaints reports suffer from a range of problems which reduce their effectiveness as a tool for consumers. In assessing the role of report cards in bottom-up accountability to consumers, Gormley and Weimer (1999) propose that factors critical to their success include:

The existence of meaningful variation in the reported measures;

The ability of consumers to exercise choice; and

The extent of consumer fees (for example, large consumer payments may diminish the salience of other measures such as quality or complaints data).

On this basis, complaints reports cards are likely to be less relevant to consumers as assessed against the second and third criteria, with significant work required to explain the meaning of variation in complaints across plans. In summary, in their current state of development, complaints reports are more likely to be useful for top-down accountability to policy-makers, legislators and regulators, than for bottom-up accountability to consumers.

It is recommended that comparative complaints data be publicly available to enhance the accountability of health insurance plans to consumers, employers, purchasers, policy- makers, legislators and regulators.

It is further recommended in developing or revising complaints report cards that consideration be given to the following features:

Complaints data should be presented as part of a suite of performance measures of health insurance plans, rather than as the sole measure of plan performance. For example, the New York report (see New York, Attachment 2) which includes multiple measures such as HEDIS scores, NCQA accreditation and complaints data is preferable to the Oregon report (see Oregon, Attachment 1) which contains complaints data (but no other performance measures) for health insurance, auto insurance, home insurance, life insurance and annuities. In comparing these two reports, it is interesting to note their genesis – the New York report involved input from both the Departments of Insurance and Health, while the Oregon report is produced solely by the insurance regulatory agency. The desirability of including multiple performance measures lends support to earlier recommendations for the need to improve communication and coordination across multiple agencies with involvement in health insurance regulation and health services quality.

Complaints report cards should include contextual information on the health insurance market to educate consumers about their health insurance choices.

Complaints report cards should incorporate consumer-friendly performance measures and presentation formats, in accordance with the findings of research (e.g. the use of grades or averages, simple graphical formats).

Complaints report cards produced by regulatory agencies should be based on justified complaints, in order to incorporate the expert adjudication of regulators and place plans on a level playing field.

Complaints report cards should include decision-support methods or expert global advice, as such tools are developed. One example outside the complaints report cards arena is the 1998 HMO quality report produced by the Maryland Health Care Cost Commission. This report provides guidance to readers by asking them a series of questions to help structure their decision making and includes a worksheet for users to include the performance measures relevant to their needs. It is more normative and less neutral than the five complaints report cards examined in this study.

Table 10.4 outlines the management and reporting of grievances in the six states studied. The NAIC Consumer Complaint White Paper does not refer to grievances managed directly by insurance plans and hence is not included in this table. The term “grievance” is used in this report to mean any complaint made by a consumer directly to a health insurance plan, compared with a “complaint” made to an insurance regulator or ombudsman program. However, as can be seen in Table 10.4, two states (Maryland and New York) distinguish between different subsets of complaints received by health insurance plans.

Under Maryland’s new Appeals and Grievances Law which took effect from 1 January 1999, grievances are complaints filed by consumers directly with their health plan challenging a plan’s adverse decision to deny services on the basis of medical necessity. Consumers will obviously file other types of complaints with their health plans, but these are not included in the count of “grievances” in Maryland. In New York, however, the term grievance means almost exactly opposite what it means in Maryland. The New York Insurance Department collects data on two types of internal complaints received by insurance plans as follows:

Utilization review appeals – complaints filed by consumers with their health plan challenging decisions to deny medical services on the grounds of medical necessity or that services are experimental or investigational; and

Four states (Maryland, Oregon, New York and Vermont) require health insurance plans to regularly report grievance data to the insurance regulator. In the two states without this requirement, insurance plans are still required to maintain grievance logs which may be examined by regulators during market conduct and quality of care exams. Texas regulators expressed skepticism about the value of collecting grievance data centrally, given the need for proper validation of such data, although interestingly the audit tools used by Texas to review grievance data held by plans seemed to be very comprehensive.

In five states the insurance regulator stipulates the data framework that insurance plans are required to use in collecting grievance data. (Note, in California the Department of Corporations stipulates the reporting framework for late grievance data, but the absence of a more general grievance data framework was not able to be confirmed with staff of the Department of Corporations. Staff at the California Department of Insurance indicated there was no grievance reporting framework for plans under their jurisdiction.)

Table 10.4: Management and Reporting of Grievances

Features

California

Maryland

Oregon

New York

Texas

Vermont

Definition of grievances

Grievances are all complaints received by health insurers

Grievances are complaints received by plans in response to adverse decision involving medical necessity

Grievances are all complaints received by health insurance plans

Utilization review appeals are challenges to plan decisions on grounds of medical necessity, experimental or investigational services. Grievances are all other challenges

Does not use term grievances, refers to all complaints received by HMOs

Grievances are all complaints received by health insurers

Insurance plans are required to maintain grievance logs

Insurance Department - Yes, 5 years, may be examined in market conduct exams

Corporations Department - Yes, but only for late grievance reports, no issue categories specified

Yes, includes 11 issue categories, CPT and ICD-9 codes

Yes, includes nine issues categories

Yes, Insurance Department issued circular in 1999, but does not stipulate issue categories

Yes, includes four issue categories

Yes, includes ten issue categories

Data on outcome of grievances required

Corporations Department - late grievances, no requirement for data on number and % upheld

Yes, number and % upheld, overturned or modified by plan

Yes, requires number and % of grievances reversed in favor of consumer by plan, also % closed at initial grievance, 1st and 2nd appeal

Yes, includes number and % reversed in favor of consumer by plan

Plans are required to keep information on "action taken" on each complaint in logs. No stipulation as to outcome categories

Yes, includes number and % of adverse decisions overturned at first and second appeals by plan

Regulator publishes grievance data

No

Not in consumer report, first policy report released in April 2000

Available on regulator web site, but not published in comparative report

Yes, in annual Consumer Guide with data on complaints received by regulator

No

No

There is no consistency in grievance data collection requirements across the five states. Of the three states which define grievances most broadly and stipulate data collection frameworks, Oregon has probably the richest reporting framework for understanding the implementation of managed care patient protections. The Oregon reporting framework distinguishes nine different categories of grievances. Categories of particular relevance include: “denials based on medical necessity”, “denials based on other coverage issues, including denials based on the service being out of the plan, out of the area or not a covered benefit” and “emergency services”. As Oregon also requires plans to report on the outcomes of managing grievances by type of grievance, regulators can use this information to determine whether plans appear to be in compliance with patient protection legislation. For example, in this study a review of grievance data across the five largest HMOs found that 71% of grievances filed by consumers concerning emergency services were being reversed in favor of consumers, compared with 39% of all other grievances. Regulators commented that this was suggestive of plans failing to properly apply the “prudent person” standards required under Oregon legislation.

Analysis of grievance data can also be vitally important both for plans and regulators in identifying issues on which greater public education may be required. For example, across the five largest Oregon HMOs, only 1% of consumer grievances about access problems were reversed in favor of consumers. This suggests that consumers probably need better information about how managed care operates, including reasonable timeframes in which they can expect to see a primary care provider and the rules for accessing out-of-network providers.

Of the other two states which use a broader definition of grievances, Vermont requires plans to report separately on physical and behavioral health services grievances and also to identify whether expedited review is required, while Texas stipulates only four broad grievance categories (plan administration, benefit denial or limitation, quality, and enrollee services).

Of the two states with narrower (and opposite) definitions of grievances, Maryland stipulates a much more rigorous reporting framework than New York. Maryland’s reporting framework categorizes grievances into eleven service types (e.g. emergency room, mental health, pharmacy), with plans then also required to provide further information using CPT or ICD-9 codes for the five most common procedures or service items associated with each grievance category. Whether this level of regulatory enthusiasm, perhaps associated with the recency of the law, yields benefits and is complied with by plans remains to be fully tested. In addition, because of its concentration on service type rather than problem issue, it seems that the Maryland reporting framework will not be as valuable as the Oregon framework in monitoring the implementation of patient protections. Finally, New York does not require health insurance plans to do any breakouts of grievance categories, but simply requires plans to report the total number of grievances and utilization review appeals.

While the states in this study were selected on factors including the comprehensiveness of their complaints reports, only New York also includes grievance data in its annual consumer guide. The two Maryland agencies have recently released policy reports analyzing the impact of the grievances and appeal legislation, which include grievance data for the first year of operation. Oregon makes individual insurance plan grievance reports available electronically on its website, but does not currently produce any comparative reports on grievances. The lack of ready public access to grievance data in some states reduces the accountability of health insurance plans to their various stakeholders.

The New York consumer guide includes information on the total number of grievances filed and the rate at which grievances were reversed in favor of the consumer for each health insurance plan. However the New York report cautions readers that “the number of grievances filed may be higher for HMOs that actively promote the grievance process to their members as a benefit” and that “there is no ideal reversal rate”. It further explains that “ a high reversal rate may indicate that an insurer’s grievance process is responsive to needs of consumers. However an unusually high reversal rate may indicate that the HMO’s process for making initial decisions could be flawed”. As discussed previously in the section on complaints report cards, consumers are likely to experience difficulty in interpreting grievance data and understanding its implications.

Recommendations

While analysis of grievance data is likely to be most valuable to regulators, it is recommended that comparative grievance data be publicly available to enhance the accountability of health insurance plans to other stakeholders including consumers, employers, purchasers, policy-makers and legislators. Like complaints data, publication of grievance data will need to be accompanied by information to educate stakeholders about grievances and what constitutes “reasonable” performance by plans.

It is recommended that the following examples of best practice may be of value to federal and state regulators in improving regulatory oversight of grievances:

Regulators should design reporting frameworks for grievances which closely match the patient protections in the relevant jurisdiction and require plans to report on the process of managing grievances (e.g. closed at grievance, first appeal, second appeal) and the outcome (e.g. upheld in favor of plan, reversed in favor of consumer etc). One good example is the reporting framework stipulated by the Oregon Department of Consumer and Business Services (Oregon, Attachment 4).

Grievance data must be subject to audit to ensure validity. The Texas Department of Insurance HMO Quality Assurance Section has developed a particularly impressive audit tool (Texas, Attachment 1) which is used by the Department in examining the processes and procedures used by plans to manage grievances. Regulators need to ensure standardization across plans in grievance reporting.

There is a “hierarchy” of complaints handling, with state regulators seeing only the tip of the iceberg in terms of consumer complaints about health insurance plans. While surveys indicate that consumers are more likely to consult their employer benefits staff with problems about health insurance, three major employers included in this study did not maintain detailed complaints records for systemic analysis.

The previous discussion on the differences between “complaints” to regulators and “grievances” to health insurance plans raises the obvious question of the relationship between the two. What proportion of consumers only contact their health insurance plan if they have a problem? Or, how many consumers contact their state insurance regulatory agency, either before or after seeking resolution through their health insurance plan? Where are consumers most likely to turn if they have a problem with their health insurance?

In attempting to answer these questions, three data sources have been examined:

Complaints and grievances data from three states (Maryland, New York and Oregon) which publish or have released some data on both measures;

Surveys which address the issue of consumer actions taken in response to health plan problems; and

Interviews with three major employers concerning their role in complaints management about their employees’ health insurance plans.

Comparing Complaints and Grievances Data

Oregon uses the broadest definition of grievances as all complaints received directly by plans, compared with New York and Maryland which define grievances as subsets of plan complaints where the consumer is challenging an adverse decision by the plan on specific grounds. Given this, the Oregon data is likely to present the most realistic picture of the comparative volume of complaints received by plans and insurance regulators.

In 1998 the five largest HMOs in Oregon reported handling a total of 3,272 grievances, while the Oregon Consumer Guide recorded a total of only 461 complaints about these five HMOs made to the Department of Consumer and Business Services. In other words, for every one complaint about an HMO received by the regulatory agency, seven grievances were received directly by the health insurance plan.

Turning to New York, in 1999 the Departments of Insurance and Health received a combined total of 16,248 health insurance complaints. Health insurance plans reported closing a total of 44,753 grievances and utilization review appeals (both measures are included to more closely approximate the broader definition of grievances used in this paper). This equates to about one complaint received by the regulatory agencies for every three complaints received directly by health insurance plans. However it is important to note that New York has a prompt payment law requiring health insurers to pay within 45 days of receipt of a valid claim and that the Department of Insurance also accepts complaints from providers as well as consumers. Hence, of the 16,248 complaints to regulatory agencies, 10,871 (67%) were prompt pay complaints, many of which would have been made by providers. If these prompt pay complaints are excluded from consideration, the ratio of complaints made directly to health plans vs. regulatory agencies increases to 8:1.

In Maryland the relationship of a greater number of health insurance plan grievances than regulator complaints appears initially not to be sustained. Hence in 1999 the Maryland Insurance Administration received a total of 11,838 complaints across its two complaints handling units, while health insurance plans reported receiving only 4,785 grievances. However, there are several factors which might explain this apparent anomaly.

Firstly, the Appeals and Grievances law only took effect in Maryland on 1 January 1999, suggesting both that consumers may only be beginning to understand their rights to file grievances with health plans and that health plans may still be on a learning curve in reporting grievances. For example, staff at the Health Education & Advocacy Unit in Maryland indicated that plans sometimes attempt to find contractual reasons to deny care, rather than attributing it to lack of medical necessity, to keep denials out of the grievance process. Second, like New York, Maryland has a prompt pay law and regulators at the Maryland Insurance Administration noted that the vast majority of general health insurance complaints are provider-driven. Third, the definition of grievances used in Maryland is very narrow (complaints challenging a health plan’s decision to deny services based on medical necessity) and represents only a subset of all complaints lodged by consumers directly with their health insurance plan. For example, in Oregon which records all grievances received by plans, only 11% of grievances concerned medical necessity. When these three factors are taken into consideration, it is likely that the situation in Maryland is quite similar to the Oregon and New York experiences.

Surveys

Several surveys attempt to measure the extent of consumer problems with their health insurance plans, with some surveys also indicating the action taken by consumers in this situation. These include:

The Consumer Assessment of Health Plans Study (CAPHS) 2.0H survey used in Maryland and New York in 1999; and

Two surveys undertaken in California in 1998 and 1999.

The CAPHS 2.0H survey asks health plan members “in the last 12 months, have you called or written your health plan with a complaint”. In Maryland 26% of surveyed consumers responded in the affirmative, ranging from a low of 15% to a high of 35% across individual HMOs. When asked whether the complaint was resolved to their satisfaction, 56% said yes, 21% said no and 23% said the complaint had not yet been settled. In New York 21% of surveyed members reported contacting their health plan with a problem in the last 12 months.

In 1998 the Californian Managed Health Care Improvement Taskforce commissioned a survey to document the extent and nature of difficulties Californians report with their health insurance plan. In total, 42% of insured Californians reported having had one or more problems with their plan in the last 12 months. However not all these problems were severe, as evidenced by the fact that even about 25% of Californians who were “very satisfied” with their health plan also reported having had a problem in the past year.

Of most interest, however, were the findings indicating what action people took to resolve their problem, with the survey allowing multiple responses. The vast majority of people contacted their health plan – 37% called the plan for information or assistance, 31% referred to plan documents and 12% wrote to the plan. The next most popular option was to contact the physician or other health care provider, a strategy adopted by 37% of people. The third most common response (17%) was to contact the employer benefits office, closely followed by asking a friend or family member for help (16%). The least likely actions were to contact a state or local agency for assistance (4%), an elected official (3%) or a lawyer (3%).

While not all these contacts result in filing formal complaints with the regulator or grievances with the plan, it can be seen once again that the volume of problems lodged directly with health insurance plans dwarfs the assistance sought from regulatory agencies. However, like the Maryland CAPHS survey, only 52% of people reporting a problem with their health insurance plan in the last year indicated that the problem had been resolved. Of people contacting their health plan, 29% of people were either dissatisfied or very dissatisfied with how the plan handled their complaint. Also of interest is the fact that 3% of people with a problem contacted an elected official, equivalent to about 200,000 Californians in 1998. No doubt, this is contributing to the “push-back” on managed care, including the strong stance taken by most state governments to create tighter legislative frameworks.

Employers

Given the prominent role of employers in private health insurance, staff of three major employers, Caterpillar, DaimlerChrysler and Motorola, were interviewed to understand their role in complaints management. None of the employers interviewed was able to provide complaints data which might shed some light on the pattern and volume of complaints, including the range of complaints related to patient protections. Complaints about health insurance were most likely to be used by the employers in this study to reassess coverage decisions.

Complaints data were not a major factor in employer decisions concerning plan and provider selection or disenrollment. However the employers surveyed may use complaints to drive systemic quality improvement. For example, Caterpillar holds regular meetings with providers to seek how to improve practice, including consideration of employee complaints, while DaimlerChrysler may conduct on-site audits of plans in response to unusual patterns of complaints, albeit infrequently.

In terms of the role of employers, DaimlerChrysler stressed the importance of clear communication in helping to prevent complaints and the necessity for both employers and plans to maintain good internal appeals processes in order to limit the volume of complaints that might otherwise go to external review.

Hence, while the Californian survey indicated that employers were frequently contacted by employees with health insurance problems, this study found that employers did not appear to provide a good source of complaints data, either in aggregate, or specifically for use in understanding the implementation of patient protections.

Policy Implications

This analysis has highlighted the importance of health insurance plans, both as the most common destination for consumers with health insurance complaints and as a much better repository of complaints data than other groups such as employers. Based on Oregon and New York, it is likely that the volume of grievances received directly by health insurance plans is between seven to eight times greater than the volume of complaints received by state insurance regulatory agencies.

These findings reinforce the previous recommendation that it is vitally important for regulators to require accurate reporting and to monitor grievances received directly by health insurance plans. Health insurance complaints received by regulators provide an incomplete picture in determining the need for legislative changes, public education or enhanced regulatory oversight. Policy-makers, purchasers, consumer advocacy groups and legislators are all potential audiences for grievance data.

The level of complaints about managed care plans relative to indemnity insurance varies across the states, being lower in Oregon, higher or the same in New York depending upon the for-profit status of indemnity plans and essentially equivalent in Vermont. Hence, in these three states evidence for the managed care backlash, as measured by consumer complaints, is decidedly mixed!

Some data on complaint categories relevant to understanding patient protection issues are available in California, Maryland, Oregon and Texas. Of particular interest is the rate at which grievances are overturned in favor of consumers. In Oregon the best outcome for consumers was for grievances relating to emergency services (71% overturned) and the worst outcome was for grievances about access (only 1% overturned). In Maryland the best outcome for consumers was for grievances relating to pharmacy services (85% overturned) and the worst outcome was for grievances relating to mental health (only 28% overturned).

The analysis to date has indicated the patchwork nature of complaints data, with the involvement of multiple agencies in several states, differences across states in the type and categories of complaints data included in published report cards and variations across states in grievance reporting frameworks.

Against this backdrop of variation, it is nonetheless of interest to examine what the complaints data reveal. Are complaints about managed care plans more common than complaints about indemnity insurance? What is the frequency of complaints relating to managed care patient protections that are of most interest to legislators and regulators? How often are complaints upheld in favor of consumers?

The following analysis attempts to provide some partial, illustrative answers to these questions. As with any analysis of state-based data, the findings cannot be directly extrapolated nationally and are likely to reflect the specific environment of individual states. For example, states with prompt payment statutes will generate a different pattern of complaints than states without such statutes. The complaints management system will, itself, substantially impact on the volume and type of complaints received by regulators. For example, a requirement that consumers exhaust health insurance plans’ internal appeals processes before making a complaint to regulatory agencies will influence the level of complaints observed by regulators.

Complaints About Managed Care and Indemnity Insurance

Comparisons between the level of complaints for managed care and indemnity insurance need to adjust for market share through, for example, using complaints rates which are based on premium volume or number of enrollees. Three of the six states studied (Oregon, New York and Vermont) reported data in a manner which allowed some views to be formed about the relative incidence of complaints about managed care and indemnity insurance.

In Oregon the complaint rate for indemnity health insurance was 48.6 complaints per $100m premiums in 1999, compared to a complaint rate of only 23.8 for managed care plans. This two-fold greater rate of complaints about indemnity insurance than managed care plans initially seems at odds with the managed care backlash. Several factors might help explain the apparent dissonance between public perceptions of a crisis in managed care and the reality, at least in Oregon, of a much lower complaint rate for these plans.

Firstly, complaints about managed care are growing much more rapidly in Oregon (a 57% increase in the complaint rate between 1997 and 1998) than complaints about indemnity insurance (15% increase). This high growth in managed care complaints may be associated with increases in market share. When people move from indemnity insurance to managed care, their unfamiliarity with how managed care works might prompt this higher growth in complaints. If this is true, the mismatch between consumer expectations and the reality of managed care protocols (such as use of gatekeepers and authorization procedures) may diminish over time, together with the growth rate of complaints.

A second more compelling argument espoused by Oregon regulators is that lower complaints rates may reflect the integral nature of the appeals process for managed care plans. If managed care plans have better well-established internal grievance handling processes than indemnity insurance, this will result in the observed finding of lower complaints rates for complaints made to regulatory agencies. The Oregon finding should again serve notice that regulators are seeing only a small fraction of all consumer complaints. Regulators commented that historically some of the large HMOs have invested substantial efforts in internal complaint resolution and consumer satisfaction. In 1998 Oregon began requiring uniform grievance procedures across all types of health insurance plans which may over time, reduce the disparity in complaint rates observed by regulators.

In New York the Department of Insurance measures complaints rates adjusted by premium volume for HMOs, commercial indemnity insurers and non-profit indemnity insurers. The highest complaints rates were recorded for commercial insurers (0.329 complaints per $1m premiums) and HMOs (0.302), with the lowest complaint rate for non-profit indemnity insurers (0.119). Hence in New York, managed care plans have about the same complaint rate as commercial indemnity insurers, but about two and a half times the complaint rate as non-profit indemnity insurers.

Finally, in contrast to both the Oregon and New York findings, regulators at the Vermont Department of Banking, Insurance, Securities and Health Care Administration noted that complaints about managed care and indemnity insurance were in proportion to their market share. Hence, in 1997/98 the Department received 290 complaints, of which 67 (23%) related to managed care plans which have a market share of about 20% in Vermont.

Complaints About Specific Managed Care Patient Protection Issues

In four states (California, Maryland, Oregon and Texas) there is some breakout of either complaints or grievances data relevant to understanding patient protection issues.

In California the Department of Corporations records the distribution of HMO complaints in 1998 as being: quality (64%), claims (34%), benefits and coverage (24%) and accessibility (7%). Within the subset of quality complaints, the most common complaint reasons across the six largest HMOs include inappropriate care (43%), denial of treatment (33%) and refusal to refer (19%) (Figure 3.2). The California Department of Corporations does not record whether complaints are justified or upheld in favor of consumers, nor does it require the reporting of grievance data collected by plans, so missing an opportunity to learn more about specific patient protection issues.

In Oregon and Maryland regulatory agencies report some grievance data relevant to patient protection issues. In Oregon an analysis of grievances for the five largest HMOs (Figure 6.2) revealed that 46% of all grievances concerned “other coverage/not covered” issues, while other significant grievance categories included medical necessity (11%), quality of care (9%), referral issues (9%), administrative issues (8%) and emergency services (8%). In contrast, Maryland uses service type categories in recording grievances, with the only parallel with the Oregon categories being the Maryland category of “emergency room” grievances. Emergency room grievances accounted for 17% of grievances in Maryland, compared to only 8% for emergency service grievances in Oregon.

Comparisons showing the rate of grievances overturned in favor of consumers are also of interest with such data being available for Maryland (Figure 4.2) and a sample of the five largest HMOs in Oregon (Figure 6.3). The grievances most likely to be decided in favor of consumers differed across the two states. In Maryland consumers were most likely to receive favorable outcomes for grievances concerning pharmacy services (85%), skilled nursing facility and rehabilitation facility care (75%) and emergency room services (65%). In Oregon the best outcomes for consumers were for grievances relating to emergency services (71%), other coverage/not covered (47%), referral issues (44%) and medical necessity (41%). Grievances which were least likely to be reversed in Maryland were mental health (28%) and podiatry, dental, optometry and chiropractic (38%). In Oregon grievances which were least likely to be reversed were access problems (1%), quality of care (4%) and quality of plan services (4%).

Finally Texas, like California, has some data on categories of complaints received by the regulatory agency, but does not require reporting of grievance data. In 1999 the most common reasons for HMO complaints were delays in claims handling (47%), denial of claims (20%), and claims reimbursement or balance billing (17%). For indemnity health insurance, the most common reasons for complaints were delays in claims handling (53%), denial of claims (19%) and unsatisfactory offer (19%).

Policy Implications

While there is much variation across states, complaints and grievances data are of value in examining the relative level of complaints about managed care and indemnity insurance plans. Regulators can also track changes in the distribution of different complaint categories and in the share of complaints upheld in favor of consumers to identify areas where public education may be required, new legislative protections may be needed or improvements in monitoring health insurance plan performance may be warranted. However variations across states in how complaints are measured, the legislative environment and the complaints handling system mean that these analyses are likely to be of most value to regulators within states, rather than in developing a national picture.

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